SYDNEY Feb 20 Australia's Fortescue Metals
Group, the world's No.4 iron ore producer, reported a
40 percent fall in first-half profit due to weak iron ore prices
but flagged resurgent demand from Chinese steel makers.
Like larger rivals Rio Tinto Ltd and BHP Billiton
, Fortescue was hit by rising costs and an unexpected
slump in the iron ore price, but noted prices had rebounded
since bottoming in September last year at around $88 a tonne.
"It has recovered more strongly than we anticipated," Chief
Executive Nev Power told reporters. He expected an iron ore
price of around $120-$130 over the next year, but said prices
could go higher if renewed demand from China persisted.
Fortescue posted a net profit of $478 million for the six
months ended December, down from $801 million a year ago but
broadly in line with analyst expecations.
The company, which carries around $12 billion in long-term
debt, also said it was on track to draw up a shortlist of
potential buyers for a stake in its port and rail unit by early
Analysts estimate Fortescue could raise as much as $5
billion for a 49 percent stake in the unit, depending on the
nature of a deal.
Power said the company was in no rush to offload the asset,
although Chief Financial Officer Steve Pearce said it remained
committed to deleveraging its balance sheet.
Iron ore shipments rose 32 percent to a record 35.7 tonnes
for the half-year, partly offsetting price volatility.
Fortescue did not pay an interim dividend and said it would
review the situation after its full-year results. Its shares
were trading down 3.6 percent at A$4.995 at 0329 GMT in a flat
Power said the iron ore price had picked up due to increased
confidence in urban development programs in China, restocking
and a significant reduction in supply from India.
Spot iron prices are currently around $157 a tonne , and have averaged $152 a tonne so far in 2013
compared with the July-December 2012 average of $118 a tonne.
Fortescue, which sells its ore at a roughly 12 percent
discount to the benchmark spot price carried cash mining costs
of $50.48 per tonne in the December quarter.
Fortescue has reinstated expansion work on its promising
Kings deposit after deferring the work last September. The
project will add 40 million tonnes a year to its overall yield.
Power said a target to boost production capacity to 115
million tonnes per year by the end of March had been pushed back
to mid or late April due to heavy rains that have slowed work at
its Firetail mining project.